PURPOSE
This transmits complete reprint for IRM 4.72.2, Employee Plans Technical Guidance, Employee Stock
Ownership Plans (ESOPs).
BACKGROUND
This IRM provides guidance for examiners on how to examine an IRC 4975(e) leveraged ESOP.
NATURE OF CHANGES
This transmittal reissues existing procedures in the new IRM format. IRM 4.72.4 replaces IRM 7.71 Chapter
4 using the same catalog number. These procedures have also been updated to include legislative and
regulatory changes up to and including the Taxpayer Relief Act of 1997.
INTENDED AUDIENCE
TEGE (Employee Plans)
Carol Gold
Director, Employee Plans
Tax Exempt and Government Entities
MANUAL
TRANSMITTAL
Department
of the
Treasury
Internal
Revenue
Service
4.72.4
AUGUST 13, 2001
4.72.4 (08-13-2001)
IR Manual
Cat. No. 35953I
Distribution: IRM 4.72.4
4.72.4
Employee Stock Ownership Plans (ESOPs)
4.72.4.1
Overview
4.72.4.1.1
General ESOP Requirements
4.72.4.1.1.1
How an ESOP Operates
4.72.4.1.2
Prohibited Transaction Exemption
4.72.4.1.3
Tax Credit ESOPs
4.72.4.1.3.1
Unused Credits Carryforward
4.72.4.1.3.2
Failure to Comply Penalty
4.72.4.1.4
Examination Steps
4.72.4.2
Qualification Requirements
4.72.4.2.1
ESOP Defined
4.72.4.2.1.1
Examination Steps
4.72.4.2.2
Floor Offset Arrangements
4.72.4.2.2.1
Examination Steps
4.72.4.2.3
Joint and Survivor Annuity Rules
4.72.4.2.3.1
Examination Steps
4.72.4.2.4
Participation, Coverage and Nondiscrimination Requirements
4.72.4.2.4.1
Examination Steps
4.72.4.2.5
Vesting
4.72.4.2.5.1
Examination Step
4.72.4.2.6
Deduction Limits
4.72.4.2.6.1
IRC 404(k) Deduction
4.72.4.2.6.2
Examination Steps
4.72.4.2.7
Distributions
4.72.4.2.7.1
Examination Steps
4.72.4.2.8
Put Option
4.72.4.2.8.1
Examination Steps
4.72.4.2.9
Allocations
4.72.4.2.9.1
Examination Step
4.72.4.2.10
Qualifying Employer Securities
4.72.4.2.10.1
Examination Steps
4.72.4.2.11
Permitted Disparity
4.72.4.2.11.1
Examination Steps
4.72.4.2.12
Valuation
4.72.4.2.12.1
Examination Steps
4.72.4.2.12.2
Independent Appraiser
4.72.4.2.12.2.1 Examination Step
4.72.4.2.12.3
Employer Secu